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NEW YORK -- Trygg-Hansa SPP Group has transferred its majority stake in Home Holdings Inc. to a bank trust, a prelude to a restructuring of Home Holdings and its debt.

Trygg-Hansa's common and preferred stock in Home Holdings late last month was placed in a trust with Citizens Bank New Hampshire as trustee for the benefit of Trygg-Hansa stockholders.

This transfer of 80% of Home's shares to a trust excludes the Home Holdings shares from the purchase of the Stockholm, Sweden-based insurer by Skandinaviska Enskilda Banken (BI, Oct. 13). The transfer, however, was contemplated before SE Banken made its bid for Trygg-Hansa.

The transfer of shares to a trust is intended to maximize tax advantages for Home Holdings and is the first part of a planned restructuring of the insurer and its debt, said David Nichols, the examiner appointed by the New Hampshire Insurance Department to oversee the run-off of The Home Insurance Co., the main operating unit of Home Holdings.

Zurich Insurance Group took over the profitable business of The Home in a controversial deal approved by regulators in June 1995.

A Zurich unit, Risk Enterprise Management Inc., manages the runoff of The Home's long-tail liabilities, and Zurich provided a $1.59 billion reinsurance contract for The Home. Although it owns about 15% of the holding company shares, Zurich did not assume the liabilities of The Home.

The restructuring is intended to benefit policyholders and bondholders, said Louis Feldman, vp at New York-based Zurich Centre Resource, part of Zurich Insurance Group.

The restructuring should be completed by the end of December, he said.

Home Holdings has a deadline of Dec. 15 to pay $11.6 million in interest payment to its bondholders. Home Holdings made a similar $11.6 million payment to bondholders in July one month after its due date.

Richard H. Hershman, treasurer of Home Holdings, said he could not say whether it would pay its bondholders on time.

Zurich has provided Home Holdings with $290 million in reinsurance specifically to cover payments to bondholders.

The full details of the restructuring of Home Holdings and its debt will not be released until regulators approve them, said Mr. Feldman.

"The restructuring that is being contemplated and negotiated is designed to be, and believed to be, in the best interests of the policyholders of The Home," Mr. Feldman said.

The main purpose of the transfer of Trygg-Hansa stock to a trust is to allow Home Holdings to obtain future tax advantages from its net operating losses, said Mr. Nichols of New Hampshire.

Since the original deal with Zurich was approved in 1995, Home Holdings has run into several problems. In June 1996, it stopped paying rent on its offices in an effort to stem the greater-than-expected erosion in its assets. Then in March 1997, The Home was placed under formal regulatory supervision after it published worse-than-expected financial results.

On the positive side, Home Holdings has reached an agreement in principle with its landlords to pay a lower rent, and The Home has negotiated lower payments to some of its creditors, including the residual pool managed by the National Council on Compensation Insurance.

The settlement with the NCCI pool has improved The Home's surplus. According to its 1997 nine-month financial results, the surplus has increased to $101 million from $55 million at December 31 1996.

Trygg-Hansa was the majority partner in an investment group which in 1991 formed a holding company to buy The Home from AmBase Corp. for about $541 million in cash as well as taking on nearly $220 million in AmBase's debt (BI, Feb. 18, 1991).

While its stock is now in a trust for the benefit shareholders, Trygg-Hansa remains a Home Holdings creditor with an outstanding loan to the company of about $40 million.